How To Improve Management Of Funds

The U.S. Department of Justice (DOJ) awards grants to fund justice programs that benefit communities in the U.S. and U.S. territories. DOJ expects the funds to be used only for intended purposes and within the established guidelines. As a grantee, your organization must provide adequate safeguards to prevent fraud, waste, abuse, and mismanagement of federal funds. Proper management of award funds leads to better allocation of funds and helps to prevent misuse.

What are common types of grant fraud?

These are some common types of grant fraud identified by the DOJ:

Conflict of interest—when an employee or volunteer has a personal or business interest that conflicts with their professional obligations or responsibilities to the organization.

Deliberate re-budgeting of funds in a manner different from the purpose outlined in the award agreement. Failure to appropriately track and document transactions such as personnel costs, contracts, indirect cost rates, matching funds, program income, or other sources of revenue.

Theft—the embezzlement of the funds that are awarded to the organization.

Fraud—an attempt to obtain something valuable through intentional misinterpretation.

Waste—misuse of funds or resources through excessive or nonessential expenditures.

Tips to Reduce Mismanagement of Funds

Recipients or sub-recipients of award funds should develop and implement preventative measures and processes to decrease the risk of fraud, waste, abuse, and mismanagement:

Implement fraud prevention measures and have regular training to educate staff and volunteers on risks.
Review and test internal control systems regularly for vulnerabilities and areas of improvement.
Verify that all financial and progress reports are sufficiently supported with the required documentation.
Develop and implement procurement processes that are reasonable, fair, and transparent.
Conduct monthly bank reconciliations to identify errors or irregularities in bank statements and detect fraud.

Grant Management: Prevent Misuse of Funds

Prevent Misuse of Grant Funds
Since the implementation of 2 CFR Part 200, aka the Uniform Guidance, grant management means even more requirements to prevent the misuse of grant funds.

Additionally, even more disclosures are required when federal grant funds are misused.

How Is Misuse Defined?

By definition, misuse of grant funds is using funds for purposes outside of those dictated by the grantor. Misuse can happen either intentionally, such as in the case of grant fraud, or unintentionally, through misapplication of grant funds. Good grant management recognizes that a grant is a legally binding agreement with a federal agency.

The federal awarding agency commits to provide a specific amount of funding, while the grant recipient agrees to administer those funds according to the grantor’s specific award terms and conditions.

Grant Management: How Do You Avoid Misuse of Grant Funds?

Grant management education and preparation are critical for an organization to reduce the risk of misusing funds.

Consider:

How do staff know what activities and costs are allowable with federal funding?
How are the various assets of the award, from funds to property, safeguarded?
How are processes and policies monitored for compliance?

While it can be challenging to comply with various grant terms and conditions, grant managers must maintain vigilance for intentional and accidental misuse of funds.

Who Should Receive Training on the Proper Use of Grant Funds?

The most critical groups for grant management training are those responsible for administering the grant agreement and all other employees working directly to support the grant work.

These groups are on the front lines for avoiding misuse of grant funds.

In addition, it is often advisable for organizations to educate grant management support staff, such as finance and human resources staff, who are responsible for maintaining strong internal controls as to the terms of the federal grants.

How Can We Prevent the Misuse of Funds?

There are many ways to prevent the misuse of funds.

Steps that are often overlooked include:

Step 1: Start with a realistic budget

Prevention of misuse of grant funds starts at the beginning of the grant application and writing process.

Organizations must carefully construct and review the budget plan delivered to the grantor, ensuring that the funding request is adequate and realistic in meeting grant objectives and compliance requirements. Key personnel such as department heads and accounting should be involved in the planning and review process.

Step 2: Have strong compliance plans in place

Ensuring that grant funds are not misused includes having strong internal controls and compliance monitoring.

Critical elements of a good compliance plan include three main mechanisms for reporting:

How funding is received
How funding is accounted for
How funding is spent

To accurately report how funds are used, the organizations must maintain strong grant management best practices with those responsible for accounting, documentation, and record keeping. For example, concerning the areas of program income and cost-share, staff members may need a closer understanding of how the funding agency treats program income and cost-share. Without that understanding, the required documentation and reporting could be missed. Additionally, following the reporting schedule the grantor requires to demonstrate that funds are spent as agreed is essential.

Step 3: Identify weaknesses in your existing compliance plans

Reducing the risk of misuse of funds is critical as the grantee must replace the misspent funds from non-federal sources.

Early detection is key to preventing big, expensive problems down the road.

When planning or reviewing your current compliance plans, ask the following questions to identify weaknesses in your current procedures:

Does the plan include procedures for ensuring adequate purchase documentation covering receipts and invoices?
Does the organization have a formal procurement process compliant with the current regulations?
If the grantee must perform specific services in exchange for grant funds, does the plan address documentation to prove the grant conditions are met?
If program income is generated via activities described in the grant, does the organization understand how the agency requires this income to be treated?
If cost-share is a condition of your grant, does the organization understand how and when cost-share funds must be received and reported?
Does the organization have safeguards around the classification of indirect versus direct funds? (Correct categorization is a complex issue and can result in unintentional misuse of funds.)
Does the organization have appropriate procedures to document time and effort requirements specified in the grant (i.e., time sheets or other time and effort reporting)?

Grant Management Best Practices for Nonprofits

Grant management is often overlooked and underappreciated. But suppose you’ve ever had to work in an organization without thought or resources to track and manage grant fundraising efforts. In that case, you quickly realize that it is a necessary discipline to keep things running smoothly and efficiently. Using effective grant management in your organization is like putting oil in your car—it keeps everything running smoothly!

Some suggestions to help you improve your grant process and help you focus your precious time on other, more impactful activities include:

Create a Grant Tracking List / Calendar

A grant calendar can help you and your organization stay on track. It should remind you of your funder’s proposal deadlines and help you submit your grant reports on time.

There are many ways to track your grants. Your grant calendar may consist of a whiteboard or wall calendar, a shared Outlook or Google calendar, a task management system, spreadsheets, or, ideally—a grant management software that ties all these pieces into one cohesive system. Whatever you use, you should strive to meet the following criteria:

Everyone has visibility to upcoming deadlines.
Task owners receive reminders when items are coming due.
Everyone on the grant team can see their upcoming deadlines and easily access grant documents.
You have a process to continually add new opportunities to your calendar.
Recurring funding opportunities are always reflected in your plan.
The system seamlessly facilitates the communication of your grant plan, progress, and results.

At the start of your grant efforts, you may be fine using a manual process and applications you already have. But if you start receiving more grants, you may soon find that you are spending a lot of time maintaining your solution and have less time to focus on building relationships with funders and engaging in other fundraising activities. Be sure to reassess your grant management needs and tools regularly so they can grow with you.

Organize Your Funders and Grant History

Tracking key information about the funders you work with is good practice. Often, this information resides at best in someone’s email folders or, at worst, in their head. This puts your organization’s fundraising capabilities at risk. You must document key contact information, past results, and funding priorities and make it accessible to those who need the information. Having quick access to details on your past, present, and future grant requests is a key part of grant management. The ability to track and access dates related to funding requests can make the difference between having a sustainable grant practice and one in which you are constantly running behind, apologizing for missing dates, and losing out on funding opportunities.

Coordinate Your Grant Team Responsibilities While Staying on Schedule

Your grant management solution can keep you on track, highlight tasks that are falling behind schedule, and remind team members of upcoming items that are coming due. Being able to quickly see what is coming up in the next two weeks or quickly see a high-level view by month is critical to keeping the process running smoothly.

Assemble a Library of Boilerplates and Supporting Documents

Spend time making sure you and your organization are “grant-ready.” There are several grant-ready resources available. Find one you like and use it to ensure you have all your ducks in a row. It is estimated that you can complete up to 80 percent of the effort to create a funding proposal before knowing which funder you will be applying to. Having this work done upfront helps you complete more applications in less time. And the time saved can then be spent on higher-value activities that will set your proposal apart from others.

Internally Report on Your Progress at Key Intervals

You should also be prepared to pull together summary reports that can effectively communicate to your organization and board the current status and progress of your grant seeking efforts. Depending on your grant management solution, this can take a few clicks—or potentially hours manipulating spreadsheets every time you need to report.

Once you start reporting on particular metrics, you can tune your grant-tracking process to be more timely and consistently track the information needed to create those reports.

How to Manage Grant Funds Efficiently and Responsibly

Determine Which of Your Programmatic Activities are Grant-Compliant

Before allocating employee hours to different programs, you must understand which programmatic activities your grant will reimburse you for.

Conducting research, for example, might be covered by a particular grant, while time and effort spent fundraising may not be eligible for reimbursement. But in many nonprofits, employees will shift their roles throughout the day, spending time on research in the morning and making calls to donors in the afternoon. And that could mean the funding sources for their salaries change multiple times per day, too.

Before you communicate with employees about where they should focus their time, you need to understand where the money for their salaries comes from. And that means, essentially, planning your time to study in advance.

Compare the Timeframe of Your Grant with the Run Time of Your Program

To ensure you don’t overdraw on your payroll funding, you’ll also need to consider the timeframe of your grant. Many nonprofits work to confront huge societal issues like improving literacy rates, eliminating homelessness, or building greener buildings to combat climate change. Programs related to these types of issues are often set up to run for decades — or even longer, depending on the scale of the problem. However, the average duration of grant funding is a little over two years. So even if your program could run on forever, you’ll have to align your activities for the foreseeable future with the duration of the grant funding them.

The good news is that your grant application has already outlined concrete program goals and outcomes. So, while the long-term goal of one of your programs might be to eradicate world hunger, your grant proposal probably stated a more concrete objective like, “Distribute 10% more free lunches in local schools.”

By working backward from the duration of your grant funding and the impact you stated in your application, you can break your program budget into smaller chunks. If you want to increase lunch distribution by 10% by the end of the year, for example, where should you be at the end of six months, three months, or even one month? How many staff hours can you devote to reimbursable programmatic activities to achieve your goals?

You can also use the reporting requirements of your grant to create these smaller milestones. If you need to send in a report every six months, for example, you might decide to assess your spending and impact internally every quarter to make sure you’re on track for your grant report.

Evaluate Your Progress Internally Before You Need to Report it Externally.

Aligning your internal processes with reporting milestones will also give you time to compile the necessary data your program officer will need to ensure you’re on track. Creating halfway — or third- or even sixteenth-of-the-way — milestones between your mandated reporting periods can help you see if you’re making the progress you need to make.

Internal reports can also prove that your organization is doing everything possible to spend funding responsibly. Suppose an employee accidentally worked overtime in one quarter, causing you to spend more on payroll than you expected. In that case, you can either reallocate hours for the rest of the quarter or use unrestricted funds to cover the difference and stay on track.

Make Accurate, Transparent Reporting Easy for All Employees

If tracking these details sounds like a lot of work, that’s because it is — and for good reason. You’re now accountable to the federal government. And they’re accountable to taxpayers.

Nonprofit accountants know the exacting level of recordkeeping that comes with federal funding. It’s part of the job, after all. But the responsibility for accurate, transparent records doesn’t rest solely on your accountant’s shoulders. All nonprofit employees should be responsible for tracking and reporting on at least one critical metric: hours worked.

Use a Resource Planning Tool to Preview Award Drawdown

Now, you have your budgetary and impact milestones planned based on your grant reports. You also have a time tracking tool for your time and effort. But how do you connect your plans to what’s happening on the ground? And how can you ensure that your employees understand where they’re supposed to spend their time in a given week or month?

Using resource planning software powered by real-time data from employee timesheets, you can quickly see if a person has worked too many hours on a certain program.

Use Your Internal Records as a Tool for Open Communication with Your Program Officer

When everyone working for your nonprofit is committed to transparent, detailed recordkeeping, you’re less likely to be surprised by overspending or program obstacles. And you can use your real-time knowledge to better collaborate with your program officer should any obstacles arise.

Equip Yourself with the Necessary Tools to Ensure You’re Maximizing Funding

Receiving grant funding means your nonprofit can do more mission-related work. However, it also means your nonprofit must do more back office work: filling out paperwork, keeping detailed records, and communicating with funders.

Investing in and implementing the right tools can help relieve some of the stress of managing grant funding. Dedicated software instead of spreadsheets — for accounting, timesheets, and project management — can help you automate, manage, and track important tasks and data.

When it comes to ensuring your employees’ time — and the funds that pay for their salaries — is spent where needed most, timesheets and resource planning can go a long way. By tracking the actual time you’re spending on a grant, you can:

Make sure you’re staying on budget to avoid unintentionally overdrawing funds.
Understand exactly how much it costs (in employee hours and payroll) to execute a program.
Make data-backed budgets for future grant applications so you can keep working toward achieving your mission.

echnology is Revolutionizing Fund Management

The role of technology in modern fund management practices is significant and has revolutionized the way investment funds are managed. Technology has brought about many improvements and efficiencies in the fund management industry, making it easier for fund managers to make informed decisions and manage their portfolios effectively. There are several ways in which technology has impacted modern fund management practices.

1. Data analysis and management:

Technology has made it easier for fund managers to analyze and manage data efficiently. With the increasing amount of data available, fund managers need sophisticated tools to process and make sense of this information. These tools enable fund managers to make data-driven decisions, leading to improved performance and higher returns for investors.

2. Automation of processes:

Technology has automated many manual processes in fund management, reducing the risk of human error and increasing efficiency. Tasks such as trade execution, portfolio rebalancing, and reporting can now be automated using algorithmic trading and portfolio management systems. This not only saves time but also ensures accuracy and consistency in executing trades and managing portfolios.

3. Improved communication and collaboration:

Technology has greatly enhanced communication and collaboration within fund management firms. With the advent of cloud-based platforms and collaboration tools, fund managers can now easily share information, collaborate on investment strategies, and communicate with colleagues and clients in real-time, regardless of their location. This has led to increased efficiency in decision-making processes and improved client service.

4. Risk management:

Technology has played a crucial role in enhancing risk management practices in fund management. Risk management tools and software can now provide real-time monitoring of investment portfolios, allowing fund managers to identify and mitigate potential risks promptly. These tools can also simulate different market scenarios and stress tests to assess the impact of market volatility on portfolio performance.r investors.

5. Access to alternative investment opportunities:

Technology has also expanded the range of investment opportunities available to fund managers and investors. Online platforms and marketplaces now offer access to previously hard-to-reach investments, such as private equity, venture capital, and real estate. These platforms enable fund managers to diversify their portfolios and provide investors with access to a broader range of investment options. Additionally, technology has made it easier to conduct due diligence on these alternative investments, providing fund managers with the necessary information to make informed investment decisions.

As technology continues to evolve, it is expected that its role in fund management will only grow, bringing further improvements and efficiencies to the industry.

All-in-one Grant Management Solution

Take the stress and excess administrative work out of grant management with an all-in-one grant management solution – PlanStreet. This grant management software allows for simple grant distribution, helping nonprofits easily disperse funds into various programs and activities. PlanStreet also generates custom reports designed for your organization. With one click, any user can access reports to view the allocation of funds, when the funds were dispersed, and more. Keep stakeholders informed and use your grant funding wisely with PlanStreet Grant Management. To learn more about how our software can benefit you and your organization, schedule a live demo.